Regulatory change drives AI adoption in MENA banking

June 18, 2025

The Middle East and North Africa’s banking sector is experiencing a major shift as regulatory demands intensify and digital transformation accelerates. Financial institutions are increasingly adopting AI-powered compliance solutions, moving from reactive measures to more proactive strategies.

The catalyst for much of this change has been the FATF’s mutual evaluations, which have pushed several countries to strengthen national compliance frameworks. Banks are now reconfiguring their internal systems to better anticipate evolving regulatory expectations.

Napier AI, a provider of a next generation intelligent compliance platform, recently outlined three central trends shaping the region’s compliance evolution.

One major development is the move towards risk-based supervision, replacing the traditional checklist approach. Regulators such as the Saudi Central Bank (SAMA), Dubai Financial Services Authority (DFSA), and Abu Dhabi Global Market (ADGM) are aligning their frameworks with global standards. A key example is Saudi Arabia’s new Ultimate Beneficial Ownership (UBO) rules, which took effect on 3 April 2025, Napier AI explained. Companies must now disclose UBO information in a central register or face penalties.

AI is playing a growing role in financial crime compliance across the region. Banks are testing AI-powered RegTech solutions to improve transaction monitoring, customer screening, and onboarding. Tools like digital identity verification, eKYC, and blockchain are enhancing compliance efficiency, supported by regulators who demand governance and transparency in these systems.

Despite this momentum, many banks remain in early stages of adoption. The Napier AI / AML Index estimates Saudi Arabia lost 5.74% of GDP to money laundering in 2023, while the UAE lost 9.32%, despite substantial compliance spending. Wider AI adoption could potentially cut these losses in half.

Looking ahead, banks must invest in modern technology and governance, particularly in anti-money laundering and sanctions compliance. AI, machine learning, RegTech platforms, eKYC, and blockchain will be essential for predictive analytics and automated reporting. Embedding compliance directly into digital products will also be crucial, as FinTech partnerships expand and regulators demand early engagement.

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